Types of Gifts
Endowed funds differ from others in that they are the gift that keeps giving. Instead of the entire amount of the gift being spent outright, the gift is invested. Each year, a portion of the income earned is spent while the remainder is reinvested. An endowment is a perpetual gift because only the spendable income is used immediately to support the university, while the principal grows continuously.
Considered one of the sources of funding with the most impact, endowments enable the university to support excellent students, teachers, and programs by providing a steady and permanent source of income. This steady stream of funding provides the assurance the university needs to recruit and retain the best and brightest students and faculty and provides access to the most advanced education possible.
Many of our alumni and friends designate their contributions to the unrestricted fund so that the President can direct resources to meet the most pressing needs of the university. This type of gift allows for the greatest amount of flexibility and enables the university to meet immediate needs.
The simplest way to support the University of Mobile is by writing a check. Your gift may designate support for a specific program such as a certain academic or athletic program, or it may be undesignated, which allows the University to direct it to an area of greatest need.
Gifts of long-term appreciated securities may help provide relief from capital gains tax and, at the same time, present charitable tax deductions. Charitable tax deductions are based on the fair market value of the security on the day of the gift. UM is able to sell the securities and use the proceeds to advance the mission of the university. Call the Office of Development for additional details.
A gift of real estate may be a principal residence or a vacation residence, a farm, a commercial building, subdivision lots, or unimproved land. The gift may be the entire property or a fractional interest in the property. The same benefits that apply to gifts of appreciated securities apply to gifts of real estate. Gifts of real estate require approval of the University of Mobile in accordance with the UM Gift Acceptance Policy.
Tangible personal property, such as paintings, works of art, or antiques will be subject to estate taxes. By giving such items to the University of Mobile, during lifetime, or at death, donors may realize certain benefits and take advantage of yet another way to make a gift. Gifts of tangible personal property that are related to the mission of the university may provide a tax deduction equal to the fair market value of the property. Gifts of tangible property require approval of the University of Mobile in accordance with the UM Gift Acceptance Policy.
Life insurance offers yet another way to make an outright gift to the University of Mobile. A life insurance policy may make a good gift choice when the policy is no longer needed. It may also be a way to make a gift without loss of current income. A gift of life insurance may also be flexible. A donor may give a paid up policy to the university or simply name UM the primary or secondary beneficiary. Charitable deductions will vary based on how the policy is gifted.
Life Income Gifts
For many, the desire to make a gift to the University of Mobile is coupled with the need to also receive income from those assets. Fortunately, there are life income arrangements that make it possible for a donor to achieve both objectives and also receive tax benefits as well.
Life income gifts to UM may take two basic forms: a gift to a charitable remainder trust or a gift to a charitable gift annuity. Gifts in one of these forms may actually increase a donor or a beneficiary income. Additionally, these life-income gifts may provide some or all of the following rewards:
- a current charitable income tax deduction
- a reduction in estate or inheritance taxes
- professional management of your gift
- a gift to the University of Mobile
Charitable Remainder Trusts
A Charitable Remainder Trust is an irrevocable trust created by a donor to which the donor contributes property. After being created, the trust will distribute income to the donor and/or other beneficiaries for their lives or a specified term of years (currently a maximum of 20 years), with the balance of the trust assets available to UM at the end of the trust. This is a good vehicle for gifting highly appreciated property or low yielding assets and creating a solid income stream. This income stream can serve as a means of providing supplemental income during retirement.
Charitable remainder trusts take two basic forms:
- • The charitable remainder unitrust and
- • The charitable remainder annuity trust.
- Charitable Remainder Unitrust
A charitable remainder unitrust pays income based on a percentage of the fair market value of the trust assets as determined annually. Because a unitrust pays a variable amount of income based on the annual market value of the trust assets, this form of charitable remainder trust can be an effective hedge against inflation. The donor's income will fluctuate based on the value of the trust principal. It is also possible for a donor to make additional contributions to the unitrust as long as the trust document specifies how these contributions are to be valued when calculating the unitrust distribution.
Unitrusts have flexibility in their structure and may take a number of forms such as the “straight” unitrust, the “net-income” unitrust, “net-income with make-up” unitrust, and the “flip” trust.
- Charitable Remainder Annuity Trust
A charitable remainder annuity trust pays income based on a percentage of the initial value of the trust. The annuity trust provides the certainty of a fixed income, which never changes, regardless of the fluctuations in the value of the trust assets. A donor may not make additional contributions to the annuity trust.
Charitable Gift Annuities
A charitable gift annuity is a simple agreement between a donor and the University of Mobile. Basically it is part gift to charity and part annuity contract. UM can provide the gift annuity document and the gift is a contractual arrangement.
A charitable gift annuity involves the irrevocable transfer of property to UM in exchange for a stream of payments for life. The amount of the fixed payment or income is generally determined by the age of the income beneficiary. Annuity payments are guaranteed and do not vary. Gift annuities are less complicated than trusts and provide many of the same benefits for the donor and for UM.
Testamentary gifts are a way to make substantial gifts to UM without depleting assets during your lifetime.
- Bequest Gifts
A bequest to The University of Mobile is a way of providing a future gift to the university and helping insure its future. A bequest may provide for a specific dollar amount, a percentage of your estate or a specific asset to be given to UM in support of its various programs. A bequest may also be in the form of a gift of the remaining assets of one's estate. Bequests, like many other gifts, may be designated for specific purposes, or they may be given without restrictions.
Forms of Bequests
- A specific bequest is usually a stated dollar amount or a percentage of the estate. It may be in the form of cash, securities, real estate, tangible personal property or any other type of property.
- A residuary bequest names the university as the residual beneficiary to receive the remainder or a percentage of the remainder after specific legacies have been fulfilled.
- A contingent bequest takes effect only if all primary beneficiaries named in the will die.
Purpose and use of the Bequest
- An unrestricted bequest is intended for the general and best use by the University at the discretion of the University of Mobile.
- A restricted bequest is one in which the donor restricts the use of the gift by designating the gift for a specific, defined purpose.
The Office of Development will be pleased to provide sample bequest language for your consideration and the consideration of your legal counsel.
- Life Income Gifts
Charitable remainder trusts, charitable lead trusts and charitable gift annuities all may be established through a donor's will. While such a gift will not provide tax savings during the donor's lifetime, a testamentary gift may reduce estate taxes, provide life-income for a loved one, and provide new estate planning options.
- Retirement Plans
Individual Retirement Accounts (IRAs), tax sheltered annuities, Keogh plans, self employed plans (SEPs), 401(k), 403(b) and other qualified pension and profit-sharing plans can also provide significant support for the University of Mobile. A donor should inform his retirement plan administrator that he or she wishes to name UM as a beneficiary of the plan. The funds will usually pass to the university outside of probate and free of all taxes.
- Life Insurance
A donor may name the University of Mobile as a beneficiary of an existing life insurance policy. The proceeds will usually pass to UM outside of probate and free of all taxes.
- Charitable Lead Trust
A charitable lead trust is the mirror image of the charitable remainder trust. The initial or lead interest of the trust is for the benefit of the University of Mobile. Assets are transferred into a charitable lead trust, which distributes its income to UM for a term of years. At the end of the trust term, the trust then distributes the trust assets to designated non-charitable beneficiaries, usually children or grandchildren.
Due to its level of complexity, the charitable lead trust requires expert legal and tax advice and planning.
Gifts-in-kind are non-monetary gifts such as equipment, technology, software, rare books, art and similar collectibles. According to UM policy, gifts-in-kind must be useful in a way that serves the mission of the university. Upon approval, gifts meeting these criteria may be transferred to the University of Mobile.
You may find that a pledge gift is easier to make because it can be made over a period of time – from multiple months to multiple years. You make a pledge gift simply by signing a pledge agreement with the University of Mobile. You get the benefit of a tax deduction when your pledge payments are made. Contact the Development Office to learn more about pledging support to UM.
Corporate Matching Gifts
Many companies have a matching gift policy that allows the company to match contributions made by its employees to qualified charities. This is a great way to double the impact of your gift. Please check with your employer or your spouse's employer to see if the company allows matching gifts. Gift types can include cash, stocks, or bonds. Include your company’s gift form with your gift.